FSB concerned at ‘Pre-Pack’ impact

Pre-packaged administrations: effective way of saving jobs and businesses? Or corrosive means of disreputable companies and insolvency practitioners to profit at the expense of other business owners?

That is the question businesses from across the country will debate when this controversial issues comes before the Federation of Small Businesses’ (FSB) annual conference (18–20 March, Aberdeen Exhibition and Conference Centre).

Pre-packaged administrations – which allow practitioners to put a company into administration, eliminate their debts and then allow it to be quickly sold on, often to people closely associated with the business – have been a feature of the current downturn.

Big names such as USC, Whittards of Chelsea and Cobra Beer have all used ‘pre-packs’ during the last 18 months. When this happens, small unsecured creditors can become victims of bad debt – while the business in trouble appears to escape without sanctions.

Concerns have been raised publicly that pre-packaged deals offer companies an easy way to walk away from their debts and leave their small suppliers high and dry. However, others contend it is a vital way of insulating and savings profitable elements of otherwise failing businesses and that pre-packs offer a better option than the alternatives.

John Walker, FSB’s UK Policy Chairman, said:

“Many FSB members have been concerned about the effect of pre-packs on local businesses and by proxy, the local community.

“While saving jobs should remain a priority, questions about the effects of pre-packs on trade-credit insurance availability, inter-business trust and jobs in the wider economy need to be addressed.”

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